capitalization rate

Definition

The discount rate used to determine the present value of a stream of future earnings. Equals normalized earnings after taxes divided by present value, expressed as a percentage.

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I had to figure out the capitalization rate, and I was utterly confused because it took a really long time to do.

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Adjusting the capitalization rate can have profound effects for company valuation, and since it is frequently tied to market rates of interest, represents a key link between stock and bond valuations.

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The capitalization rate of the products was considered a big upset and it was unclear if the discounted method would allow the new revenue flow of the protein shake company to flourish.

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